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CVS Caremark Exits Tobacco Category

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CVS Caremark (CVS - Free Report) has announced that it will discontinue the sale of cigarettes and other tobacco products at its more than 7,600 CVS/pharmacy stores across the U.S. by Oct 1, 2014.

CVS Caremark will be the first national pharmacy chain to undertake such a health awareness initiative. Its shares fell as much as 1.8% in the trading session following the announcement.

On an annual basis, CVS Caremark expects to lose revenues worth $2 billion as a result of the move, which equates to roughly 17 cents per share. The anticipated impact on 2014 earnings is expected to be in the range of 6 to 9 cents per share.

However, the decision to remove tobacco products from its shelves is not likely to affect the company's 2014 segment operating profit guidance, 2014 earning per share outlook, or the company's five-year financial projections provided at its Analyst Day held on Dec 18.

The company is, however, optimistic of making up for this financial loss through other lucrative means and is currently evaluating opportunities.

The retail pharmacy chain believes that it has adopted this path solely for the well being of its customers. This customer-driven approach will also give CVS Caremark a chance to promote itself as a company focused on achieving better health outcomes for its consumers.

CVS Caremark also plans to launch a national smoking cessation program this spring to raise awareness regarding the benefits of quitting smoking.  This unique program will provide information as well as treatment options on smoking cessation at all CVS/pharmacy locations and MinuteClinic, in combination with online resources.

The extensive network of the company’s MinuteClinic locations, empowered with well-trained pharmacists and nurse practitioners, will further extend additional comprehensive programs to CVS Caremark pharmacy benefit management plan members to help them refrain from smoking.

This initiative by CVS Caremark complements the proposals of various healthcare bodies like those of the American Medical Association, American Heart Association, American Cancer Society, American Lung Association and American Pharmacists Association, which have jointly raised their voice against tobacco sales in retail outlets with pharmacies.

Smoking is a leading cause of death, resulting in more than 480,000 deaths annually, in the U.S. It is also estimated that worldwide, tobacco use causes more than 5 million deaths annually. Eventually, tobacco use is likely to result in more than 8 million deaths annually by 2030 as per current trends.

Smoking is also a dominant cause of cancer, heart disease, stroke and other lung diseases. It not only deteriorates overall health in an individual but also indirectly results in financial burdens that come with healthcare expenditure related to adverse after-smoking health effects.

CVS Caremark expects to influence millions of Americans to quit smoking through its consumer awareness program which will highlight the ill-effects of smoking. This consumer-and-community friendly attempt is likely to help reduce the burden of chronic diseases in the healthcare industry.

Recently, many pharmacy chains have been putting their best foot forward in delivering better health standards for people. Accordingly, they have come forward with attempts like counseling by pharmacists, introduction of an array of wellness products and many others.  

CVS Caremark, among the leading players in the retail drug store industry along with Rite Aid Corp. (RAD - Free Report) , Herbalife Ltd. (HLF - Free Report) and Walgreen Co. , currently carries a Zacks Rank #3 (Hold).

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